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Tuesday, June 7, 2011
By John D. Doak, Oklahoma Insurance Commissioner
Though the dollar figures involved are not in the millions, the broken trust can leave a victim emotionally bankrupt: Anti-fraud investigators in my department recently investigated a former Oklahoma funeral director for misusing nearly $10,000 in prepaid funeral funds from the accounts of two couples and one other individual.
Cooperating with the office of Max Cook, District Attorney for Creek and Okfuskee counties, detectives in the Oklahoma Insurance Department’s Anti-Fraud Division under the leadership of Deputy Commissioner Randy Brogdon developed the case against this individual. With Mark Riley of the Oklahoma Funeral Board at our side and a statement of support in hand submitted by Richard L. Duggar, President of the Oklahoma Funeral Directors Association, I revealed the charges during a press conference in Sapulpa on May 5.
The case against the defendant will play out in court, so I will not attempt to lay it out here. But I do want the charges filed in Creek and Okfuskee counties to serve notice to businesses and consumers alike – the Oklahoma Insurance Department is standing watch over prepaid funeral trusts.
Some 360 Oklahoma funeral homes provide a worthy service to their communities by offering prepaid funerals and cremations. In response, the state has established a number of regulations applying to these very specialized accounts. By law, each individual’s money must be placed by the funeral home in certain conservative, interest-bearing investment vehicles (such as certificates of deposit) and cannot be risked in higher-stakes accounts where the customer’s funds might be lost through poor investment performance. Apart from a small percentage of the balance the funeral home may receive for administering the account, each customer’s prepaid funeral premium is to be kept separate from any other accounts established by the funeral home and used solely for the benefit of that customer upon death.
Some time ago, the Oklahoma Legislature shifted oversight of these accounts from the Banking Commission to the Insurance Department. That was a welcome and prudent decision, for these financial products are very much a form of insurance. The customer is paying today for the peace of mind that their final arrangements will be accomplished as budgeted in the future.
Each funeral home offering prepaid benefits by law must submit an annual report to the Insurance Department on the status of all prepaid funeral benefit trusts and insurance arrangements the home administers. But upon taking office in January, I decided the Insurance Department should inspect these accounts as never before.
My goal is for examiners to thoroughly review about 100 prepaid funeral benefit plans every year. In this way, the books of every funeral home in Oklahoma offering prepaid funeral benefits will be closely inspected at least once every three years. Exams can also be ordered more frequently if there are significant customer complaints or signs of financial problems identified during the review and examination of the funeral home’s books and records.
Each examination will consist of a thorough review of all pertinent funeral home records. Funeral homes will provide bank statements, will document the files of prepaid funeral trust accounts established there, explaining all deposits, transfers and withdrawals made for any reason, and will offer other information such as the current price list of products and services provided by that funeral home. On-site visits to a funeral home will be made by the examiner if circumstances warrant. A complete analysis of all available data will determine whether each customer’s account is fully funded and is being administered within the law by the funeral home.
This inspection process benefits the funeral industry in addition to its customers. Examiners will help prepaid funeral benefits permit holders to know and adopt the best practices in accounting for these special trusts. Deficiencies in bookkeeping can be spotted early and corrective measures taken to reconcile them. And, the examination process will separate the few that are abusing these trust funds from the many funeral homes that are not, leaving only the honest to do business in Oklahoma.
News that the Oklahoma Insurance Department and local authorities filed charges against one former funeral director for violating the trust of his prepaid funeral customers might have caused some consumers to fear for prepaid funeral accounts already purchased and others to decide against making such an investment. But I want this news to have the opposite effect.
From this day forward, Oklahoma consumers should be more confident than ever regarding the solvency of prepaid funeral trusts and the security of their investment in pre-need planning. With the valuable cooperation of the Oklahoma Funeral Board, Oklahoma Funeral Directors Association, and reputable funeral directors across the state, the Oklahoma Insurance Department is taking every step to assure your money will be safely kept and your final arrangements will be paid for, just as you intended.
If you have any questions or concerns about prepaid funeral trusts, or any other insurance policy or product, please call the Oklahoma Insurance Department’s consumer hotline at (800) 522-0071, or visit us online at oid.ok.gov.